Retirement Plans

Solo 401(k) Plan

Self-Employed Persons

If you're self-employed and have no employees, except for your spouse, you can set up a "solo" 401(k) plan. There is no age oor income restrictions, but you must be a business owner with no employees. A solo 401(k) plan is not a new type of 401(k) plan. It's simply a traditional 401(k) plan covering a business owner with no employees, or the business owner and his or her spouse. Solo 401(k) plans have the same rules and requirements as any other 401(k) plan.

A solo 401(k) plan is sometimes called:

  • Solo-k
  • Uni-k
  • One-participant k

Self-Employed Person Treated as Employer and Employee

Federal income tax purposes, a self-employed person, such as a sole proprietor or partner in a general partnership, is not treated as an employee of his own business. However, for retirement plan purposes a self-employed person wears two hats: one as "employee" and another as "employer".

This means a you may two separate plan contributions on your own behalf in accordance with the plan's contribution rules that apply to an employee and to the employer. This "double-contribution" rule allows a substantially greater contribution amount.

2024 Solo 401(k) Contribution Limits

As a self-employed persosn with no employees, you may make the following contributions:

  • 2024 Contribution Limits to Solo 401(k) Plan:
    • As employee, the maximum contribution is 23,000.
    • As employer, an additional contribution of 25% of earned income.
    • If aged 50 and older, an additional $7,500 may be contributed as a catch-up contributioon.
    • The combined employee and employer contributions cannot exceed $69,000, or $76,500 for those age 50 or older.

Compensation Limits

The IRS limits the amount of compensation that determines retirement contributions. For 2024, the compensation limit is $345,000.

Solo Roth 401(k)

A Roth IRA rules:

  • You cannot deduct contributions to a Roth IRA.
  • If you satisfy the requirements, qualified distributions are tax-free.
  • You can make contributions to your Roth IRA after you reach age 70 ½.
  • You can leave amounts in your Roth IRA as long as you live.
  • The account or annuity must be designated as a Roth IRA when it is set up.
  • If your solo 401(k) plan allows Roth contributions, the Roth solo 401(k) contribution limit is the same as the pre-tax contribution limit.
  • Contributions and earnings in a Roth 401 (k) can be withdrawn without paying taxes and penalties if you are at least 59½ and had your account for at least five years.
  • Withdrawals can be made without penalty if you become disabled or by a beneficiary after your death. Rollovers allow you to avoid taxes on Roth 401 (k) earnings.

Changes for 2025

  • Contribution limit increased to $70,000
  • Catch-up contribution age 50 to 59 and 64 or older $7,500
  • Catch-up contribution for people ages 60 to 63 increased to $11,250